SIMON LAMBERT: Why are low interest rates good for you? Perhaps it's time the Bank of England clearly explained its thinking

Rate minds: The Bank of England made bold claims for forward guidance, yet the man or woman on the street would struggle to see through the jargon

There will be many This is Money readers who think the Bank of England has just cooked up another excuse not to raise interest rates.

Having initially formed forward guidance around unemployment a year ago, it changed tack when this dropped like a stone.

The Bank then identified the somewhat nebulous concept of economic slack as a new deciding factor on when rates would be ready to rise.

The idea here was that spare capacity in the economy meant that it could grow at a faster rate without requiring rates to rise.

Now admitting that slack has narrowed, the Bank has placed wage growth on the lower for longer table – or rather the lack of it.

While I can appreciate the line of argument, it’s hard not to notice the now sizeable gap between the Bank of England’s view that it is sensibly and transparently laying out a path of action and what our readers think.

Perhaps summing that up best was yesterday’s comment from RogerP, in Bedford, on our Inflation Report story: ‘Oh dear, flexible goalposts on the move again?’

To give the Bank its dues, it cannot stand accused of failing to furnish people with plenty of information. The Inflation Report is a hugely detailed document that runs to 56 pages of charts, data and observations that cover off the key parts of the economy.

August’s report was packed full of good reasons for erring on the side of caution, while once again reiterating that the new normal for rates is going to be much lower than the old normal.

The problem is that any attempt to navigate the economics jargon and understand what the Bank is actually saying would leave most people tearing their hair out.

Yet the man and woman on the street are meant to take the Inflation Report, and MPC members’ occasional comments – sometimes contradictory, sometimes revealing and sometimes gnomic - as their guidance on what’s going to happen.

Mind the gap: Where households stand on interest paid out as a percentage of their net income and interest received

We were given to understand that the whole point of forward guidance was to let households and businesses know where they stood.

They could then make rational and informed decisions based on a coherently laid out strategy for interest rates.

For all the information thrown at people and its noble aim, forward guidance is not doing that. It is very much a ‘by the City, for the City’ production.

The problem is not just that people feel there are mixed messages on the future of interest rates, after all the element of surprise has traditionally been part of the rate-setting arsenal.

It is more that people lack a clear official explanation of why rates have had to stay so low for so long, and why the Bank thinks it is a good idea not to try to get back to the old normal at 5 per cent.

Handed a copy of the Inflation Report before a mortgage meeting, I sincerely doubt whether the average borrower would walk in there happy that they comfortably understood the thinking on interest rates.

Offering the Bank’s website to a saver dismayed at the low returns on their Isa would not do much good either, in terms of helping them find out why rates are still on emergency measures and not likely to rise much for a long time.

So here’s a novel idea.

Considering the sizeable number of people who think they would be better off with higher rather than lower rates, why doesn’t the Bank set itself a new task?

It should explain whether more than six years of a 0.5% Bank Rate has worked - in easy to understand terms - and exactly what the benefit of future low rates will be.